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Wednesday, April 27, 2016

‘Someone's gotta help me dig’: going deeper & longer into the rise and fall of commercial archaeology in Northern Ireland

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At the end of 2015 I
took a look at the financial health of the Northern Irish commercial
archaeology sector (Another
turn round the plughole? Commercial Archaeology in Northern Ireland in 2014).
This, in turn was a follow-on from two previous posts on the topic, chronicling
the post 2008 collapse of the market and its sustained failure to recover [here
| here].
These posts have made use of the publicly available data submitted by these
enterprises as part of their end-of-year accounts and hosted by, for example, Company Check. The available data was
time limited, only going back to 2007 – and that only for one Company. For the
other three NI Companies, the data only started in 2008, as the crash happened.
I’ve long hoped for a means of pushing this back to gain a deeper time context
to the rise and fall of the sector. The other point I would make here is that
my analyses had been based on four easily accessible KPIs: Cash at Bank;
Current Assets; Current Liabilities; and Net Worth. There is an awful lot to be
said for working with this rather high-level data, not least of which is that
it allows simple and clear understandings, even if it is at the cost of
fine-grained detail. Since the last time I took on the task of writing about
the financial decline of the Northern Irish commercial archaeology sector I
worked closely with the people at CompanyCheck to address both of these issues –
time depth and level of detail – to produce a new interactive Tableau dashboard.
While the folks at CompanyCheck have been very helpful, this assistance has an
attached cost and I would amplify my usual plea for donations: if you like this
post and find it useful or interesting, please consider donating via PayPal.
The button is in the top-right corner & all assistance would be
appreciated! Also, before you continue reading this post, or interacting with
the Tableau dashboard, I would suggest that you read ‘The Dashboard’ section of
the post dealing with essentially the same situation for the Republic of
Ireland [here].
Finally, I would reiterate that although I originally took the position that I
did not want to directly identify companies (instead preferring to refer to
them by the year of their incorporation) the legal advice I have received is
that I should provide some linkage to allow fact checking and allow for
meaningful rebuttal. To this end, I have created an appendix [here]
where the interested reader can link directly to the underlying company data.

Screenshot of the current state of the Tableau visualisation

What’s new?

The first thing that
the reader should note is that the available financial data now stretches back
to 1998, when only two companies operated here (the 1990 Co. & the 1997 Co.).
Obviously, the number of available sets of accounts increase in the years after
the establishment of the 2002 and 2005 Cos. The other point of note is that the
Key Financials control now has several additional categories of data. On top of
the KPIs I’ve used previously (Cash at Bank; Current Assets; Current
Liabilities; and Net Worth), there are Creditors
>1y (i.e. Creditors that are
not due to be repaid within the current financial year. In many cases these
would appear to represent bank loans etc.).
This represents a division of the data between long- and short-term company debt.
For clarity, the former Current Liabilities KPI is now referred to as Current Liabilities <1y. The other
new KPIs are Debtors; Fixed Assets; and Stock/Other (this last category includes the value of work in
progress but not paid for etc.). The
older Key Financial of Current Assets is seen to be a combination of Cash at
Bank, Debtors, and Stock/Other. As a final note, at the time of writing, one
company had submitter 2015 accounts, I have chosen to include these too.

1990 Co. Current Assets & Debtors Data, 1998-2011

The 1990 Co.

I’ve written
extensively about the financial affairs of the 1990 Co. in the past [here].
Between this and the fact that they haven’t submitted accounts since 2011, I’m
not particularly keen to go over the same ground once again. To the best of my
knowledge, this company appears to have laid off all its staff and now exists only
as a small-scale owner/operator endeavour. Nonetheless, it is instructive to
look at the Current Assets and the Debtors data in combination. When the data
is examined closely, it is clear that the Current Assets of the company are
largely made up of monies owed to them (Debtors). While money owed to you is
always a positive commodity, it is hardly a safe one. Anyone familiar with the
difficulties of getting developers to pay for archaeological works will be aware
of how flimsy an asset this can be. While point-blank refusal to pay and a
general inclination to ignore demands for payment have long been standard fare
from the clients of archaeological companies, the 2008 economic downturn saw
many developers – both large and small – file for bankruptcy and cease to
trade. It is for this reason that I have included a ‘tooltip’ of ‘Debtors as a
% of Assets’. Hover over any data point when a single company is selected and
this percentage will be displayed (because of how Tableau works, competing
values from multiple companies will result in an asterisk being displayed). In
the case of the 1990 Co, we can see that from 1998 to 2006 Debtors made up a
substantial proportion of the company’s assets, but not the entirety of it. This
ranges from 52.5% in 2001 to 96.9% in 2003. However, from 2007 the values have
been so close that the two lines are indistinguishable, ranging from 99.54% in
2008 to 100% in 2011. In absolute terms, there is a vast drop in the value of
debtors from £1.9M in 2008 to £381K two years later. Without access to further
data, it is impossible to say if this represents evidence of either the payment
of these outstanding debts or them being written off (in whole or in part) as
unrecoverable.

1997 Co. All KPIs, 1998-2014

The 1997 Co.

In my past analyses the
available data for the 1997 Co only went back as 2008, but with the additional
information now available, this can be extended back to 1998. This adds a
number of interesting perspectives that had not been previously available. For
example, the Cash at Bank in 2008 was £33K, but we can see that this was
already falling from £45.9K the previous year. More surprisingly, 2007 appears
to have been the first really successful year for this outfit as Cash at Bank
totals only rose above £0 in 2001 (£3K) and 2002 (£315). Their 2012 accounts
indicate that they had a debt of almost £36K coming due in more than one year.
Although the exact nature of this debt is unclear, it was reduced to £31.5K by
the following year and appears to have been completely discharged by 2014. A
comparison of the Current Assets against the company’s debtors is instructive,
especially in contrast with the data from the 1990 Co. Here Debtors made up the
Current Assets from between 17% (2001) to 89% (2011). Many of these are
substantial percentages of the Assets, but the never ventured into the range of
the 90%s, or even the 100% that the 1990 Co. recorded in 2011. Then again, in
absolute terms, we’re talking about vastly different figures – in 2007 the
Current Assets of the 1997 Co. are listed at £308K, while the 1990 Co. (having
a downturn) had Current Assets of £706K. Similarly, the 1990 Co. had total
Current Assets of £1.9M in 2007 against £260K for the 1997 Co. We’ve not
previously had any insight into the fixed assets of the companies, so it is
interesting to now see that in the period from 1999 to 2004 this was in the
range from £3K to less than £5K. However, there was obviously some serious
investment as over the course of the next three years the value of Fixed Assets
soared to £21K (2007) with a rapid decline thereafter. This decline is most
probably the result of accounting depreciation, though shedding of assets may
also have been a factor. The steady decline to a low of less than £3K in 2013
shows that there had been little, if any, investment over that period. The latest
(2014) figures show an uptick to £4.6K but, while significant in the face of a
long-term decline, is hardly evidence of a strong recovery.

2002 Co. All KPIs, 2003-2014

The 2002 Co.

Like the 1997 Co.,
records for the 2002 company were only available as far back as 2008, but now
goes back as 2003, the first year where they would have been obliged to produce
accounts. We can now see that, judged by the Cash at Bank totals, this company
had their two best years in 2006 (£82K) and 2007 (£68K), easily outstripping
their previous known best of £51K in 2009. We can also see that the company had
a Creditor (>1y) of nearly £8K in 2006, but this was reduced to £3K the
following year and appears to have been fully paid back by 2008. Again,
comparing the percentage of Current Assets made up of Debtors is instructive as
they parallel each other so closely, moving from a minimum of 60% in 2007 to
99.6% in 2008. In absolute terms there is a massive fall off in Current Assets
from 2008 (£376K) to 2013 (£27K) that may be the result of Debtors paying their
debts, or certain sums being forcibly written off as unrecoverable bad debts.
While I can speak with no authority on this point, it would seem likely that in
the post-2008 financial landscape one of these scenarios is more likely than
the other. Finally, an examination of the Fixed Asset data shows strong
investment from £6K in 2005 to just over £37K in 2007, but with continued falls
ever since. As noted above, in connection with the 1997 Co., this is more
likely due to accountancy depreciation than disposal of assets. While this may
be a ‘natural’ practice, the unbroken fall would appear to indicate a 7-year
long hiatus in investment. I find little in this to cause anything other than
worry for the future.

2005 Co. All KPIs, 2006-2015

The 2005 Co.

The new data adds two
further years of accounts to those already available for this company, bringing
it back to 2006, the earliest they could have been expected. While this data
doesn’t add a vast amount to what we already know about their financial health,
they are the only one of the four companies to have submitted 2015 accounts. We
can see that they had two very successful years in terms of their Cash at Bank
in 2009 (£70K) and 2013 (£86K). I think it is fair to say that the latter cash
surplus was – in large part – due to their winning and maintaining the contract
to supply archaeologists to a significant and high-profile wetland excavation.
However, that amount fell to £24K in 2014 and dipped to under £19K in 2015. The
figures also show Creditors >1y with a debt of £3.5K in 2008 and 2010,
though this appears to have been completely cleared by 2013. Analysis of the Current
Assets against the Debtors shows a much more conservative relationship between
the two than in other cases. At best, Debtors made up only 30% of the Current
Assets in 2009, and as high as 82% in 2012. According to the 2015 returns, the
company has Current Assets of £74K, of which 75% (£56K) is made up of moneys
owed. The 2013 returns showed that this operation had accrued Current
Liabilities due within one year of £90.5K – presumably in line with their
higher operating costs and higher income – and that this had fallen to under
£8K the following year. For 2015 Current Liabilities crept up to £35K, again
presumably in line with income and increased operating costs. Fixed assets tell
a story of sustained and continuing investment in the period from 2007 (£1.5K)
to 2010 (£12K), but with generally falling values down to £0.00 in 2015. Within
this time period, the greatest single drop was from the £12K noted for 2010 to just
£2.2K in 2011. While depreciation of fixed assets is to be expected, this
ongoing fall suggests a complete lack of inward investment over recent years.
The final KPI I’m going to examine in this post is Net Worth. As discussed in
previous posts, this fell from highs of £90K in 2009 to under £10K in 2010.
Despite their rise to £62K in 2013 – a peak that bucked the trend for the rest
of the sector – they fell back to just under £30K the following year. 2015 has
obviously been better and the 2005 Co.’s Net Worth has recovered to £39K. As
the only company to have submitted accounts that are available for examination,
it remains to be seen if this reflects an industry-wide recovery, or (like
2013) a single-company surge.

Average of all KPIs for all companies, 1998-2015

Overall picture & the future ...

Looking at the average
picture for all companies it is tempting to read the 2015 data as an indicator
of recovering revenues and improving fortunes for the commercial archaeology
sector. However, it is simply too early to draw any such conclusions. However,
the additional historical data allows us greater context to see spikes in Cash
at Bank in 2001 (£38K), 2007 (£35K), 2009 (34£K), and 2013 (£30K). Average
Creditors >1y (i.e. bank loans and
interest thereon) have been relatively modest with particular spikes in 2006 (£15K),
2012 (£12K), and 2013 (£11K), though all appear to have been repaid by 2014. As
noted before, there is a defined spike in average Current Assets (with a
corresponding surge in the value of Debtors) in 2009 that has been generally
falling in the time since. While the 2015 values would indicate increases, they
are only slight and don’t even match the 2013 values. Average Current
Liabilities <1y show a jagged plunge from £19K in 1998 to £0.5M in 2008. The
story since then has been of an equally jagged reduction in debt to £35K in
2015. The average values for Fixed Assets shows significant investment from
£11K in 2003 to £33K the following year. This, essentially, plateaued until
2007 (£32K), before going into steep decline ever since. While some of these
KPIs show significant negative change in 2008 and 2009, this indicates that (at
some level) investment in the companies effectively ceased a year earlier. The average
Net Worth of the sector is interesting and of vital importance in understanding
where commercial archaeology in Northern Ireland is at the moment. As all the
previous discussions on this topic have shown, it reached its zenith in 2009
with an average Net Worth of £195K, before plummeting to just £6.4K the
following year. Despite some improvement in 2012 (£9.5K), this fell again to
-£5K in 2013 (this despite the exceptional year for the 2005 Co.). This
recovered to £3.4K in 2014 and, albeit based on one set of accounts, this has
increased by more than an order of magnitude into 2015. I can’t repeat it
enough that this latest data is from only one company and cannot be relied upon
as a reflection of the industry as a whole. Even if this accurately and
adequately reflects the reality of the situation, it shows how far below the
best years of 2008 and 2009 the industry still remains.

My original point when
I started this analysis remains the same as it is today – to assess how robust
the sector is and – by implication – how safe the excavated remains of our
shared heritage are. Simply put, if one of these companies goes under there are
no safeguards in place at a governmental level to ensure that this material –
artefacts, ecofacts, along with written and digital archives – do not end up in
a skip, being transported to landfill. Despite the apparent return to
profitability seen from one set of accounts, there is no greater reason for
hope than there has been for some time. I still believe that the long-term safety
and security of our excavated past remains hanging by the narrowest of financial
threads.

As always, the Tableau
visualisation below (or directly available on the Tableau Public server here)
is interactive and will allow the reader to drill down into the data for their
own analyses.

Notes

For the best viewing experience of the Tableau dashboard, I would recommend going to Full Screen mode (F11) … there will be less scrolling needed!